Among the things finance leaders must focus on for the new year is undoubtedly the rising interest and trend on sustainability.
ESG reporting is likely to be more on the center stage in 2024, making evaluation of the organisation’s governance structure and sustainability strategy an imperative to identify gaps in time to address them.
According to Susanna Hasenoehrl, head of sustainability for Asia Pacific & Japan at enterprise application software company SAP, sustainability can no longer be considered separately to the finance function because it is increasingly clear that sustainability performance is fundamentally linked to business performance.
A recent SAP report of 1,300 business leaders across Asia Pacific and Japan found almost that 74% of APJ businesses saw sustainability strategies contributing to outcomes like revenue or profit growth to a moderate or strong degree.
Already, almost one in ten (9%) APJ businesses say sustainability is material to their business results, and another 32% say it will be within five years.
"It is absolutely critical businesses implement an accounting and reporting system for their ESG data that is as auditable, transparent, and reliable as their financial data accounting," Hasenoehrl says, "2024 is the year we have to start treating enterprise carbon data the same way we treat financial data."
For Hasenoehrl, trustworthy, transparent, auditable, and ethical use of data is fundamental to successful reporting, both in financial and sustainability reporting.
"Making progress on sustainability requires businesses for record and report on real ESG data, not averages or estimates."
A significant amount of the data needed to operationalise sustainability performance is already available in the ERP systems businesses already use to run their business. Hasenoehrl points out that this can be supplemented by capturing data such as carbon emissions reliably, at source.
Businesses can then calculate product and corporate carbon footprints, transparently communicate, and comprehensively report auditable sustainability data to their key stakeholders.
"Sustainability reports must be clear on targets, progress, and next steps across climate, waste, circularity, social and related governance measures," the SAP sustainability head says, "For example, when it comes to climate, sustainability reports should communicate clearly where emissions are occurring, set clear, science-based short, medium, and long-term targets, and transparently and auditably report on progress using real ESG data."
The future of finance and sustainability
Hasenoehrl believes 2024 is the year that finance and sustainability become inextricably linked.
With more regulation, including carbon and plastic taxes, being introduced around the world, she explains that every business will have to understand and account for emissions for every product, service, and business process.
Hasenoehrl adds that organisations must take the new International Financial Reporting Standards (IFRS) S1 and S2, which will be used in many countries as the accounting foundation for ESG reporting.
In addition, product-level emissions accounting must be integrated into the business – into financial reporting and decision-making, to enable organisations to make granular, accurate, and timely decisions that are financially and environmentally sound.